Tate broke charity laws by buying art from its trustees

The Tate Gallery has been found guilty of breaking charity laws for buying works of art by its own trustees.

The Charity Commission discovered that the Tate spent more than £700,000 on seven works of art by trustees in the past nine years, but did not seek independent valuations or even require the artist-trustees to leave the room while the purchases were approved.

In a withering report, following a nine-month investigation, the commission said that it "had found serious shortcomings in the processes for managing conflicts of interests". The commissioners went on: "In any charity we would be concerned that such basic matters were neglected, but in a charity of the size and stature of the Tate we are very disappointed."

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The verdict - that the Tate broke charity law but not the criminal law - is one of the most serious indictments of the running of one of the nation's major cultural institutions in living memory.

However, Sir Nicholas Serota, the director of the two Tate galleries, Britain and Modern, and the most powerful figure in modern British art, said that neither he nor the current trustees saw any reason to resign.

Procedures would be tightened and made more transparent and the price of all purchases would in future be made public, he said. In the galleries' favour, the commission ruled that the Tate had not misused public money and that the purchases, though "flawed", were not against the interests of the Tate.

The commission said that it would not use its powers to revoke the deals, but also revealed that it would now investigate the purchase of a further 13 works from artist-trustees, including some of the best-known names in British art: Sir Anthony Caro, John Piper, Patrick Heron and Howard Hodgkin, between 1960 and 1989.

The investigation was prompted by a row last autumn when The Stuckists, an art movement opposed to the Tate's championing of conceptualist art, disclosed that the Tate paid £705,000 (only £600,000 to the Tate because VAT could be reclaimed) to Chris Ofili, a former Turner Prize winner and one of its trustees, for a work called The Upper Room in 2003. It was made up of 13 canvases decorated with his trademark elephant dung.

Critics not only questioned the price but it emerged that Victoria Miro, Ofili's agent, had asked Sir Nicholas to speed up the purchase because the artist needed the money urgently because he was getting married. It is believed that more than half the money was raised from wealthy collectors who themselves owned works by Ofili.

The issue of public galleries purchasing, or even accepting, gifts of works by its own trustees is highly sensitive. For a major institution to be seen to be endorsing an artist can send the price of his works soaring. The Tate's 12 trustees, which must include three artists, are appointed by the Prime Minister and the board is required to follow principles established by the Nolan Committee on the conduct of public bodies, including declaration of trustees' interests.

The Tate's other purchases from trustees investigated by the commission were: £20,000 for Wilson's Phalarope and Untitled by Bill Woodrow in 1997; £20,000 for Knowing by Michael Craig-Martin, also in 1997; £23,030 for an oil painting Echo Lake by Peter Doig in 1998; and £53,500 for two photographic series, Theresa and Signs, by Gillian Wearing.

The commission found that all except Ofili, failed to leave the room while the board approved their purchases. All, apart from Ofili, had failed to complete the trustees' Register of Interests and no independent outside valuations were sought, except in the case of Ofili - though that was not until the controversy broke after the purchase had gone through.

Charles Thomson, the leader of the Stuckist art group, said of the findings: "This proves what we and others have been saying about the Tate for years. It is unaccountable and displays a contemptuous arrogance to the public which funds it."

Sir Nicholas, who unexpectedly handled the crisis yesterday in place of Paul Myners, the trustees' chairman, accepted the commission's criticisms but insisted that public money had not been misused. "I wish with hindsight that we had done things differently," he said.